A Charitable Remainder Trust is an arrangement which provides for payments to you for life or a specified period of years. At the end of the trust term, the remaining balance in the Trust is distributed to qualified charities of your choice. You receive a charitable tax deduction at the time of the gift to the Trust.
Unlike Charitable Gift Annuities, you select your annual payout at the time the Trust is created. The minimum percentage selected must be at least 5%. The maximum allowable percentage depends on your age or the term of the Trust.
If an appreciated asset such as stock or real estate is given to charity, prior to sale, it will yield a charitable deduction based upon the current fair market value of the asset. By giving an appreciated asset to a CRT, you will receive a payout based on the full value of the property placed in the CRT, without any reduction for taxes that otherwise would have been paid it you sold the property and the net after-tax proceeds were invested.
An alternative to establishing a CRT during your life is to provide an income interest for children or grandchildren after your death through the use of a CRT. This type of gift can be utilized to reduce the death tax in your estate while providing an income to family members on a portion of your estate.
Charitable Remainder Trust Benefits
- Annual payments to you for your lifetime or a term of years
- Immediate income tax deduction based upon the value of the remainder interest of the Trust
- The remainder interest which passes to charity is not subject to estate tax
- If funded with appreciated assets, you avoid the immediate realization of capital gain tax
Charitable Trusts must be administered according to a set of strict IRS requirements. Because Barnabas Foundation has the expertise to provide this service, we often serve as Trustee for Charitable Trusts.